London, Aberdeen, Manchester and Edinburgh are the areas of the UK that are most likely to outperform in terms of local demand dynamics over the long-term and thus support office value growth, according to a report by Legal & General Property.
Unlike many other research studies that compare area differentials, LGP has examined local authority level data to understand and identify the locations around the UK that are best placed to see growing demand.
Assessing employment growth prospects through a number of structural concepts, including agglomeration and density, entrepreneurship, education and human capital, population growth, amenity and housing, it has created a list of local areas where conditions look best for demand growth over the long term.
Eight out of ten of the top areas identified by this research were London boroughs, with Tower Hamlets, City of London, Westminster, Southwark and Islington taking the top spots, reinforcing the strong growth dynamics of the capital and the conviction that London will continue to abide for office demand over the long term.
However, a range of relatively well positioned areas were shown to lie outside of London and the South East, including Aberdeen, Edinburgh and Manchester.
Underpinning the benefits of a more nuanced approach to investment, this research therefore argues against the overly simplistic idea of a clear North/South divide.
Additionally, strong areas of growth potential in the south east included Cambridge, Watford, Basingstoke and Reading, with Cambridge particularly strong.
Bill Page, business space research manager, says: “From a fund management perspective, the only aspect of a property that cannot be changed is its location. Understanding occupier demand at a granular, local level therefore underpins future performance prospects and should play an integral part in any effective long term investment strategy.
“Overall, London stands apart from the rest of the UK on a number of the characteristics that we deem key to drive long term growth in property demand. But there are locations that show similar strength outside of London and the south east, which merit active consideration when looking to deploy investment capital. In depth knowledge can create compelling and sometimes unexpected investment opportunities.”